Balfour Beatty Reports 11 Percent Fall in Q1 Construction Revenue

London-based international infrastructure group Balfour Beatty Plc (LON:BBY) said in a first-quarter trading update on Tuesday, May 14 that construction had remained a drag for the group.

Balfour Beatty recorded a significant drop in revenues from this business segment in the first three months of 2013, especially in Britain, where the market continued “to be adversely impacted by the shortage of major public projects and fierce competition in the regional markets”.

Balfour posted a 23 percent drop in UK construction revenues for the first quarter, which it described as the main reason for the 11 percent drop in total construction revenue in the same period.

Construction revenue in the U.S. “was stable, with a strong order book” as the infrastructure firm took advantage of opportunities in the Northwest, Texas and Florida and in sectors such as commercial buildings, data centres and leisure facilities. Construction businesses in Hong Kong and Dubai remained on track to deliver to management’s expectations.

Balfour Beatty said on April 29 that a combination of “difficult market conditions and poor performance in the UK construction business” had resulted in reduction by £50 million of the management’s full-year guidance for profit from UK construction activities. Trading in other businesses remained in line with prior expectations in aggregate, despite a £10 million shortfall in the German rail business.

Although it described the UK construction and mainland European rail markets as “very challenging”, Balfour said in Tuesday’s trading update that it expected to benefit from its cost efficiency programmes currently in place, a recovery in operational performance in UK construction, and ongoing strategic initiatives.

Balfour also highlighted that it believed its current strategy would leave the firm “better positioned” to benefit from infrastructure growth with profits expected to be more heavily skewed to the second half than in previous years.

Balfour Beatty Share Price Climbs

Despite the absence of improvement in the company performance since the profit warning in April, Balfour Beatty’s stock climbed in London trading on Tuesday immediately after the release of the trading update.

By 10:08 GMT on May 14 the Balfour Beatty share price has gained 1.85 percent to 220.20p. In the year to date, however, shares in the construction group have declined by almost 19 percent, with a 10 percent drop recorded in the last month alone.